Instruction on the Operation of the Open Market Window of the Central Bank of the Republic of Guinea

REPUBLIC OF GUINEA CENTRAL BANK Conakry, [Date] 2015

INSTRUCTION on the OPERATION OF THE OPEN MARKET WINDOW OF THE CENTRAL BANK OF THE REPUBLIC OF GUINEA

The Central Bank Board, Having regard to [2014/016/AN] establishing the Statute of the Central Bank of the Republic of Guinea (BCRG); Having regard to Law L/2013/A60/CNT of 28 November 2013 on the regulation of financial institutions; Having regard to Order No. 12010/PRG/SG of 27 September 2010 on...

ARTICLE 1: OBJECT [Text covers open market operations]

ARTICLE 2: PRINCIPLES Eligible applicants as per Article 2 may access these open market operations. The BCRG establishes, quarterly, a list of participants in these operations.

ARTICLE 3: ELIGIBLE SECURITIES AND BILLS Central Bank refinancing operations are provided in the form of repurchase agreements on eligible public or private bills and securities, admissible to Central Bank windows under conditions defined by the latter. Bills and securities taken in repurchase must have a maturity date after their value date that exceeds the operation's duration. The repurchase procedure is executed by transferring the securities and bills to the Central Bank. Borrowers at the open market window must, upon submission, hold eligible securities or bills in deposit at the Central Bank with a value at least 10% higher than their request amount. Participants authorize the Central Bank to take in repurchase, if applicable, deposited collateral bills and securities covering the advance amount. During the operation, interest received on securities taken in repurchase is fully credited to the transferor.

ARTICLE 4: ADJUDICATION METHODS Open market operations are conducted via open tenders available to all eligible participants. Auctions are generally conducted at variable interest rates. The Central Bank may also conduct fixed-rate auctions. The minimum submission interest rate is set by the BCRG. Offers below this minimum are rejected. The maximum liquidity injection amount put up for auction may be announced in advance. The Central Bank may also announce a maximum submission amount per participant. For fixed-rate auctions, participants propose only the amount of their bid.

CHAPTER I: OPEN MARKET INJECTION OPERATIONS ARTICLE 5: NATURE OF OPEN MARKET INJECTION OPERATIONS The Central Bank may initiate the following open market operations:

• ordinary liquidity injection operations;
• specific liquidity injection operations, comprising: o long-term liquidity injection operations; o settlement-purpose liquidity injection operations.

ARTICLE 6: ORDINARY INJECTION OPERATIONS Ordinary operations consist of regular liquidity injections. Their frequency is weekly. Their duration is set at one (01) calendar week.

ARTICLE 7: LONG-TERM LIQUIDITY INJECTION OPERATION These operations have maturities ranging from one (1) to twelve (12) months.

ARTICLE 8: SETTLEMENT-PURPOSE LIQUIDITY INJECTION OPERATIONS These operations are conducted via rapid tenders with an organizational window, between the announcement time and result notification, not exceeding six (06) hours. The value date, duration, and volumes put up for auction are communicated by the Central Bank at the time of announcement.

CHAPTER II: COMMON PROVISIONS FOR THE ORGANIZATION OF OPEN MARKET INJECTION OPERATIONS ARTICLE 9: TENDER NOTICES FOR OPEN MARKET INJECTION OPERATIONS The BCRG announces each auction via a tender notice distributed to participants by any rapid communication channel, no later than six (06) hours before the submission deadline. The notice includes operation characteristics, including:

• reference number;
• auction type (fixed or variable rate);
• maximum amount put up for auction, if applicable;
• maximum submission amount per participant, if applicable;
• value date;
• duration;
• maturity date;
• deadline for submission.

ARTICLE 10: SUBMISSIONS / BIDS Bids are submitted no later than the day and time indicated in the tender notice. Submission amounts are in whole billions of Guinean francs. They may be split without limitation into multiple bids with different interest rates, each in whole billions of Guinean francs. Interest rates must be multiples of one-sixteenth of a percentage point. Bidders indicate the amount and type of collateral deposited. Submissions are transmitted via agreed rapid and secure communication channels with the Central Bank. Submissions are firm and irrevocable.

ARTICLE 11: COUNTING / ALLOCATION OF BIDS Submissions are centralized and allocated at the Central Bank on the submission day, starting with those offering the highest interest rate. The interest rate of the last accepted bid is the marginal rate, corresponding to the minimum accepted rate. A weighted average rate (WAR) of accepted submissions for each auction is determined, calculated as follows: WAR = Σ(Ti × Si) / ΣSi where: Ti is the interest rate of accepted bid Si; Si is the amount of accepted bid Si; n is the number of accepted bids.

ARTICLE 12: NOTIFICATION OF RESULTS Results for ordinary or long-term auctions are notified to participants no later than twenty-four (24) hours after the submission date. For settlement-purpose liquidity auctions, results are notified no later than six (06) hours after the submission time. They include overall results, the marginal rate, the weighted average auction rate, each participant's individual result, and any other information deemed necessary by the Central Bank. The summary results table and a press release are published. Participants' accounts are credited on the value date indicated in the tender notice with their accepted amounts. At maturity, the same amount is debited from these accounts.

ARTICLE 13: DEPOSIT OF INTERESTS Interest is calculated pro rata for the number of days between the value date and effective settlement. Each accepted bid accrues interest at the proposed rate, according to the variable-rate auction technique or, where applicable, the fixed rate announced in the tender notice. Interest is charged on the first business day following maturity, debiting the ordinary or settlement accounts of advance beneficiaries. Interest is calculated on the basis of the "actual number of days / 360" convention and rounded up to the nearest franc. The Central Bank notifies each concerned participant of the accrued interest amount using forms.

ARTICLE 14: PAYMENT DEPOSIT / DEFAULT Any subscriber lacking sufficient provision to repay advances at maturity is suspended until their situation is regularized and for at least one (01) session, without prejudice to any other applicable penalties. In case of recurrence within twelve (12) months, they are suspended for at least two (02) sessions after regularization. The Central Bank publishes a notice for participants indicating, for a given auction, payment incidents and sanctions imposed on their authors. Unpaid amounts are subject to a penalty calculated at the Central Bank's exceptional overdraft rate.

ARTICLE 15: MONTHLY AVERAGE INTERBANK RATE No later than the first business day following month-end, the Central Bank calculates and communicates to credit institutions the Monthly Average Market Rate. It equals the duration-weighted average of the weekly tender rates for the month. The formula is as follows: TMM = Σ(Ti × di) / n where:

• Ti: marginal rate of weekly liquidity injection operations (i) in the month;
• di: corresponding duration of Ti;
• n: actual number of days in the concerned month.

ARTICLE 16: SEMI-ANNUAL AVERAGE INTERBANK RATE No later than the first business day following semester-end, the Central Bank calculates and communicates to credit institutions the Semi-Annual Average Interbank Rate. The formula is as follows: TMS = Σ(Ti × di) / n where:

• Ti: marginal rate of weekly liquidity injection operations (i) in the semester;
• di: corresponding duration;
• n: actual number of days in the semester.

CHAPTER III: FINAL PROVISIONS ARTICLE 17: SUPPLEMENTARY PROVISIONS The rules and practical procedures for BCRG open market operations are supplemented or clarified, as needed, by Central Bank information notes.

ARTICLE 18: ENTRY INTO FORCE This Instruction, effective from its signature date, repeals and replaces all prior contrary provisions and shall be published wherever necessary.

P.O. Box No. 692-Conakry-Phone:(+224)30412651-Fax:(+224)30414898-Telex:22225BAREG-GU